Prime Minister Hun Manet has announced that the state will levy taxes on any parcel of land over 5ha which is not in use. The policy aims to prevent people from buying land and letting it sit idle, as this leads to a loss of productivity and decreases economic activity. The tax will become effective early in 2025.
He introduced the new tax as he presided over the 19th government-private sector forum, held on November 13 at the Peace Palace. The forum brought together senior government officials, representatives from the private sector and members of the diplomat corps.
He explained that most idle land is not located in Phnom Penh, and the state wants land owners to do their best to use their land to serve the Kingdom’s economy.
“The government has four purposes in taxing land which is not in use. First, we will prevent people from buying dozens of hectares of land for speculation. This will also prevent them from selling it a higher price and taking advantage of the market, leading to a loss of productivity,” he said.
“Second, it will encourage them to use the land in line with our development goals. Third, we aim to increase economic activity and create employment opportunities and fourth, we aim to increase tax revenue, in order to increase the available budget for sub-national expenditure,” he added.
He continued that there were not many people who can afford to purchase over 5ha of land and not use it. Therefore, the vast majority of the general public will be exempt from the new tax. There were also certain terms which mean land would not be taxed.
Manet explained the state would consider exempting the tax on land which was used for crop soil, or if construction of a factory or other large enterprise was planned. If the land was leased from the state or registered in the educational or vocational training sectors, it would also be free from the tax, as such land was still contributing to the economy.
“In order to prevent any land in the Kingdom from being left behind, we need to encourage people to capitalise on their land and generate an income which provides economic benefits,” he said.
He reiterated that the new government has not created any new types of tax and would not increase existing tax rates. He also noted that the previous government had cancelled several types of taxes, including those on slaughterhouses, contractors, stamp tax for gasoline, administrative letters, court letters and civil registry documents, road tax for motorcycles, tuk-tuk, tractors and stamps on letters establishing companies.
Nget Chou, economic analyst, believed that it was an excellent move for the government to introduce the new measures on idle land. Previously, a small plot of land was subject to taxes anyway, and the new measure will encourage economic activity such as construction, agriculture or industry. It will also benefit the state, through increased tax revenue.
“In Cambodia, it is not hard for those who own over 5ha of land to ensure it is productive. They can cultivate it by planting saplings or crops, for examples,” he said.
He added that those who can afford to invest in land clearly have the resources to convert their land into agricultural or industrial use.
He suggested that the government make the implementation of the mechanism as transparent as possible, to avoid levying double taxes.
Em Sovannara, a professor of political science, supported the government’s idle land measures, saying that it was clear that it aimed to prevent a loss of productivity. Idle land costs the national economy and the new taxes would increase revenue and grow the Kingdom’s production chains.
He proposed that priority sectors for land use be laid out.
“Anyone who owns 5ha of land or more can avoid this levy by conducting a business of any kind. The government should set priority usage sectors, in order to prevent them from using the land in an arbitrary way to avoid paying taxes,” he said.
He also suggested that the government inspect smaller plots of land in urban areas or other places where smaller areas of land still have economic potential. The state should determine particular sizes or terms for these areas.